Thanks to new seasonal openings, and a new computational methodology, the unemployment rate has fallen to 8% or 7.4%, depending on the source: in any case, a very acceptable level. Unfortunately, salaries are not growing and in several cases are decreasing, therefore depressing the already weak domestic demand, and in general the economy of the Czech Republic. Usually on summer there are several seasonal job opportunities: they should result in a temporary relief and might even foster a small surge in domestic demand. Unfortuantely, it probably won’t be enough to determine a growth in the industrial production.

Nevertheless, Prague has an almost full employment situation, even though the negative signals will become harsh reality later during the year. Again, the weakest regions keep being that. And they shall continue being weak, considering the all too generous subsidies to the unemployed and the negative attitude to relocation among the job-seekers.

Industrial Output

The industrial sector is still in deep crisis. Since several months, the industrial output is decreasing, influencing critically the constant decline in GDP since about a year and half. On a y-on-y basis, March recorded a minus 6%, which is just less bad at -2.2% when adjusting for working days. The expectations for the coming months are very dire: orders to the industrial sector are steeply declining, -1.8% y-on-y in March. Both domestic demand and export markets are stagnating. When adding to that the cronical poor productivity of the Czech industrial sector, and rising costs, we have a picture very grim and worrisome. Although very surprisingly there are some optimists that even believe the coming months will be of positive growth. One significant positive signal comes from the repositioning of some industrial entities onto a price-sensitive output: that could help keep consumers purchases more local, instead of cheap asian imports.


As everywhere nowadays, the inflation in the Czech Republic is still quite under control, recording a very low +1.7% y-on-y in April. This figure just seems a good and strong signal. The reality is that many economists are very worried, since in this case the real reason for the low inflation rate is the lack of domestic demand: it is not the effect of a healthy economy. During last several months, the GDP declined therefore reducing domestic demand and inflation. Furthermore, the power of purchase of families which has been eroded, private debt has increased, and everybody expects a surge in direct and indirect taxation: all that, makes for a depressed domestic demand, which effectively puts a lid on prices increase.

Foreign trade

As usual, the trade balance is in positive territory, albeit well less than one year ago. In March the recorded surplus was 32bn CZK, wich is way less than in 2012, when the figure was 46bn. Both exports and imports fell dramatically in March, by 6.5% and 7.1% respectively. Unfortunately, those are very harsh figures, and in line with last several months trend.
Albeit decreasing by 4bn, the trade balance with EU is still very positive, but the deficit with asian countries, China especially, has deepend by 2.8bn: this figure is quite worrisome for the outlook of the Czech industrial sector, for obvious reasons. During economic crisis, consumers tend to purchase more price-sensitive goods, nowadays mostly imported. The paradox is the consequential weakening of families expenditure, which in the long terms determines an even deeper income erosion, in a dangerous spiral.

by Gianluca Zago